Zuffa retains Boies Schiller & Flexner

December 30, 2014

The UFC issued a statement in which it announced that it has retained the law firm of Boies, Schiller & Flexner to defend it against plaintiffs seeking class action status alleging Zuffa of violating antitrust laws.

Per the UFC web site:

We have built a popular business from modest beginnings by meeting the needs of fans and fighters. Millions of people have watched our bouts, we have instituted leading health and safety measures for our athletes, and fighters are free to negotiate contract terms.

We will stand up against the plaintiffs in this litigation every step of the way, and have engaged attorneys from Boies, Schiller & Flexner LLP with a depth of experience in antitrust issues.

Bill Isaacson, our lead litigator, says, “The antitrust laws have long favored companies that create new products and services that consumers want. That is exactly what the UFC has done here through its long and substantial investment in building a popular sport.”

We are proud of the company we have built, confident in our legal position, and intend to prevail in this lawsuit.

Payout Perspective:

Boies, Schiller & Flexner is a high profile firm as some may recognize the last name Boies as David Boies from Bush v. Gore (Boies represented Gore) fame.  Lead counsel appears to be Bill Isaacson, a partner with the firm.  According to his bio, he provided key cross-examination (according to me the hardest thing to do in litigation) of NCAA witnesses in the 2014 case of O’Bannon v. NCAA.  Isaacson, who was one of the attorneys representing the plaintiffs, prevailed on behalf of O’Bannon.  With the retention of its attorneys, it will be an interesting and hotly contested matter.  Stay tuned in 2015.

Jackson’s management clarifies severing ties with Bellator

December 29, 2014

The manager for Rampage Jackson issued a statement regarding the reasons it left Bellator and signed with the UFC per a report with MMA Fighting.  Jackson’s management cites Bjorn Rebney as the source of the contractual irregularity with Bellator and its subsequent reasons it left the company.

Per Lee Gwynn, Jackson’s manager, Jackson was disenchanted with Bellator and decided to leave.  According to Gwynn, in addition to a Bellator contract, Bjorn Rebney offered a Paramount movie deal, a Spike TV reality show and a TNA pro wrestling contract.  Gwynn interpreted these additional incentives as creating an entertainment contract rather than a normal fight contract.  He also included a PPV payment model for Jackson.

It appears from the statement that the PPV buys did not meet Jackson’s incentives in his contract and they looked to renegotiate the structure at that point.  However, Rebney was replaced by Scott Coker.

As Gwynn interprets the contract with Bellator as an entertainment contract, they claim that there was a 45 day notice to list the grievances it had with the company and the company had time to rectify the issues.  Obviously, with Jackson signing with the UFC, Coker was not able to satisfy Jackson’s concerns.  Per Gwynn’s statement it gave Bellator 70 days instead of the requisite 45 days.

Gwynn indicated that his lawyers, UFC lawyers and “an outside law firm” agreed with Jackson’s position that terminating the Bellator contract was “legitimate.”

Payout Perspective:

This is obviously one side of the story.  But, Jackson’s reps paint the picture that Rebney is to blame for the contract and the subsequent breach.  The question of whether Jackson could renegotiate the contract when the PPV did not fulfill his contract is an issue.  Also, another issue is whether the additional “entertainment” sweeteners made the entire contract an entertainment contract.  Rampage did have a “reality series” on SpikeTV entitled “#Rampage4Real.”  He also participated in TNA.  As we recently revisited the Ronda Rousey split with Fight Tribe, at least in California (we assume the Rampage contract was signed in California since Bellator’s office is in Newport Beach) the fight contract and entertainment portion of the contract can be parsed out to be litigated and/or arbitrated.  This will not be the end of this contractual drama.

Coker denies “minor league” status; Bellator scouts Lesnar, Del Rio

December 27, 2014

MMA Fighting reports on Scott Coker’s impressions of the UFC lawsuit as it pertains to how his organization is described in the lawsuit as a “minor league.”

Coker indicated in the article that he had not read the Complaint (we assume the first one filed by Le, Quarry and Fitch but all of them mirror each other) filed by former UFC fighters against Zuffa.  Unsurprisingly, Coker does not think that Bellator is a minor league.  He did not comment on whether the UFC was a monopoly or his thoughts on the lawsuit.  He did indicate that Bellator and parent company Viacom had nothing to do with the lawsuit.

Coker also stated to MMA Fighting that it reached out to Brock Lesnar about fighting with the company.  Lesnar’s WWE contract ends after Wrestlemania in March.  He also stated that Bellator would be in on “every single major MMA free agent in 2015.”  Apparently this also may mean every pro wrestler wanting to be an MMA fighter as it has initiated talks with former WWE star Alberto Del Rio.  Del Rio is slated to do some dates with Ring of Honor Wrestling in the new year but Bellator has reached out.  The 37 year old Del Rio (real name Jose Rodriguez) has an MMA background including two fights in Pride which includes a loss to Mirko Cro Cop in 2003 per Sherdog.  His last MMA fight was in February 2010.

Payout Perspective:

The lawsuit filed against the UFC has to be of interest for Bellator and its own business practices.  For the cynical, the fact that Coker did not read the lawsuit or watch the press conference announcing the lawsuit allows him plausible deniability on commenting on his impressions of what was filed and what he thinks becomes of it.  Certainly, Bellator lawyers are keeping an eye on the litigation that is evolving in San Jose.  Yet, Coker denying that Bellator is “minor league” is not surprising.  As the head of the organization, he does not want the company characterized in that way as it sends a message to fighters, sponsors and advertisers.

Will Bellator business come into scrutiny if the UFC lawsuit gets to substantive legal issues?  Certainly.  But, even before the lawsuit, in January of this year White stressed that Viacom-backed Bellator was a competitor (h/t MMA Junkie).  Coker’s comments appear to indirectly support White’s statement here which may be beneficial for Zuffa in the lawsuit.

As for its strategy in 2015 of actively pursuing free agents, looking at a pair of 37 year olds (Lesnar and Del Rio) may not be best for competition but as we are seeing, MMA is moving to more entertainment than pure sport.  Bellator’s biggest night occurred with a Tito Ortiz-Stephan Bonnar main event.  The UFC recently signed 36 year old CM Punk.  Signing Lesnar would be huge for Bellator.  Although the former UFC Heavyweight Champ may be past his prime, he is a proven draw.  Besides Lesnar and Del Rio, if Bellator can secure quality free agent fighters in addition to “brand name” talent, it can continue to build toward competing with the UFC.

14 for 14: No. 12 Rousey wins CSAC arbitration hearing against Fight Tribe

December 26, 2014

Earlier this year, Ronda Rousey split with longtime manager Darin Harvey and his management company Fight Tribe Management.  After an arbitration hearing in which both sides participated, it was determined that Rousey could be released from her fight contract and was not responsible for payments claimed by Harvey due to him.

Harvey filed a “Petition to Compel Arbitration” in LA Superior Court and requested that the briefing be sealed which precludes the public from reviewing the documents filed.   After the hearing held this past March, the CSAC determined that Rousey’s “Service Agreement” with Fight Tribe was void as to the “professional fighting services only.”  The arbitrator determined that Harvey had not followed the rules promulgated by the California State Athletic Commission with respect to fight contracts.

From our post earlier this year:

The ruling, in favor of Rousey, is premised on Harvey not properly executing the fight contract on “printed forms approved by the commission.”  The Commission ruled that, “[t]he controlling contract was the subject “Representation Agreement”, which was entered into in California and specifically binds the parties to be governed by California law.” Hence, the rationale by the Commission would lead it to conclude that since the contract was not on its printed forms, the contract was void as to the fighting portion of the contract.  In addition, the Commission ruled that “a fighter-contract” is not valid unless both parties appear at the same time before the Commission, and the contract receives the Commission’s written approval.”  This did not happen as the contract, which was originally drafted in May 2012, was not executed until January 2013.  Regardless, it was not done before the Commission.

Even though Harvey’s “Representation Agreement” did not comply with the Commission rules, he still argued that he was entitled to “quantum meruit” (latin for “what one has earned”).  This is a theory in contract law allowing a party to be compensated for actual work/services performed.

Under this theory, Harvey was seeking to recoup losses incurred from representing Rousey.  Harvey indicated in an exhibit at arbitration that from January 1, 2010 to January 31, 2014, he collected $25,608 in income from Rousey fights, $23,180 from PPV fights and $20,830 from income of sponsorships.  This is offset by Harvey’s claim that he paid $170,376 in expenses related to Rousey’s fighting career which makes Harvey at a loss of $85,818 from representing Rousey.  The paid expenses included paying for training including strength and conditioning, sparring partners and living expenses.

Longtime California promoter, Roy Englebrecht empathized with Harvey’s situation but also advised:

I have seen this happen a number of times over the years, where well intentioned people want to get involved in the fight business, but never take the time to learn about the business and some of the rules that govern it. This situation with Ronda and Darin could have been avoided if Darin knew the CSAC rules and followed them. This manager/fighter agreement or promoter/fighter agreement in California is unique to the sport, and if not followed you will lose, as this ruling showed.

The issue of the contract between Rousey and Fight Tribe with respect to representation outside of “professional fight services” still remains in state court in California.

Payout Perspective:

This is a textbook example of the ills of manager representation in sports.  Certainly, Harvey and Fight Tribe should have followed the rules of the CSAC.  While the representation of Rousey probably was a “handshake agreement” at first (note that there was an 8 month lag between Rousey actually signing contract and the date of Representation Agreement), it was not until Rousey started to become popular that issues began to occur. Rousey signed on with William Morris Endeavor and Fight Tribe likely felt like it was being boxed out of its representation.  We shall see if 2015 brings a resolution to the issue.

Vera, Garza file third lawsuit against Zuffa in antitrust class action

December 26, 2014

A third lawsuit was filed on behalf of fighters against Zuffa in the Antitrust Class Action lawsuit in San Jose.  Brandon Vera and Pablo Garza were the two plaintiffs in this particular lawsuit which was filed on Christmas Eve.

“The Truth” was thought of in high regard by the UFC at one time.  But, he was derailed by contract issues in 2006 which had him embroiled in a civil lawsuit with his former manager.  Vera came back to the UFC but never lived up to the lofty expectations.  Vera was released from the UFC in June 2014 after a 9 year career with the company.  According to Vera, he turned down the UFC’s offer to extend his contract.   Dana White indicated to Vera that White wanted to “fix this” but communication between the two stalled after that.  Vera later found out through social media that he was released by the UFC. Vera signed with OneFC and fought earlier this past month.  Vera indicated, per MMA Fighting, that White congratulated him about the signing.  According to the article, Vera stated he had “no hard feelings with White in particular.” However, he stated that he had wished the UFC had “handled things differently.”

Pablo Garza fought with the UFC from December 2010 until April 2013.  According to Bloody Elbow, in 2012 Garza refused to sign a petition which stated the UFC was not a monopoly and that fighters are treated fairly.

MMA Payout has not seen the third lawsuit as of this writing, we will update if needed.  But, one might expect the lawsuit to mirror the two previous ones filed in San Jose.  As with the previous two, there is no word of service of the Complaint or whether Zuffa’s legal team will waive service to allow for more time to respond.

There has not been an official statement released by the UFC on this third lawsuit (or the second for that matter).

Payout Perspective:

In my parts, there is usually a “gentleman’s/gentlewoman’s agreement” about filing things on Christmas Eve although there was no need to respond by Zuffa on Wednesday.  Regardless, Vera is a noteworthy plaintiff in this action since he had contractual issues with the company dating back to 2006.  Garza also may be an interesting plaintiff based on his representation that he was asked to sign a document stating that the UFC was not a monopoly.  Of interest would be whether the UFC allowed the fighters to review it, how much time they had to review it and if they were allowed to have an attorney review it.

MMA Payout will keep you posted on the situation as the lawsuits continue to come in.

Second antitrust lawsuit filed by fighters against Zuffa

December 24, 2014

Two more MMA fighters have filed a lawsuit against Zuffa citing violations of Sherman Antitrust Act Section 2.  The second Complaint which will seek to establish a class action lawsuit was filed Monday, December 22nd in Federal Court in the Northern District of California San Jose Division.

Luis Javier Vazquez and Dennis Hallman filed their Complaint which mirrors the one filed last week by Jon Fitch, Nate Quarry and Cung Le.  The same law firms that represent the initial three fighters are also representing Vazquez and Hallman.  According to Bloody Elbow, there are more fighters “on deck” to filing lawsuits.

Vazquez fought only once in the UFC in June 2011.  He had another 5 fights in WEC from August 2009-November 2010.  Zuffa purchased the WEC in December 2010.

According to Sherdog, Hallman fought in the UFC from December 2009-December 2011.  He may be best remembered for wearing a speedo to fight Brian Ebersole.  As a result, Dana White gave Ebersole a bonus after his win over Hallman.

As of this writing, the UFC has not issued a formal response to the second lawsuit although one might assume it would respond the same as it did with the first lawsuit.  It’s not known whether Zuffa has been served with the second Complaint and/or it will waive service to give itself an additional amount of time to respond.

Vazquez et al. v. Zuffa, L.L.C. by JASONCRUZ206

Payout Perspective:

Vazquez resides in Ontario, California and Hallman is from Olympia, Washington yet the lawsuit is filed in San Jose, California; the same venue as the other UFC case. We shall see when Zuffa lawyers respond, whether there is a challenge that these plaintiffs are “forum shopping.” It’s clear that the filing in San Jose is part of the plan by plaintiffs.  It looks like the intention is for these lawsuits to be filed in San Jose and seek to certify the class and request a consolidation of the cases as the plaintiffs will establish the commonality of the legal claims, the adequacy of the fighters representing the lawsuit, the size of the class and the similarity of plaintiffs’ claims.  We will keep you up to date as to if and when other fighters file a lawsuit against the UFC.

Lawyers looking at Rampage contract dispute per Coker

December 23, 2014

MMA Fighting reports that Scott Coker has turned over the Rampage Jackson issue to Bellator attorneys.  The UFC announced the signing of Jackson on Saturday night.

Jackson provided an official statement on his departure from Bellator on his web site.

A portion of the statement reads:

After five months of grueling negotiations and gray-area contract talks with Bellator MMA and parent-company Viacom, Quinton “Rampage” Jackson officially terminates his contract with the up-and-coming promotion citing multiple breaches since the removal of President and Founder Bjorn Rebney. Jackson exercises a clause in the agreement that allows for a 45-day window to satisfy any contract dispute. Bellator MMA, failing to fulfill the requests of Jackson, was put on notice, failed to respond and eventually notified that negotiations were officially terminated.

Ariel Helwani of MMA Fighting reported that the point of contention for Jackson was that “Bellator refused to provide the pay-per-view numbers for Bellator 120 when he fought against Muhammaed Lawal as contracted.”

Payout Perspective:

It appears that what Helwani is reporting is Jackson’s request for an audit of the Bellator 120 PPV numbers which one may conclude the buy rate is related to Jackson’s compensation.  One might assume that the contract allowed a 45 day window where the parties would work to fix any issue with the contract.  We can deduce that whatever problem that arose in the contract between Jackson and Bellator was not fixed.  Or, it was not fixed to the satisfaction of Jackson.  Jackson argues that since Bellator could not “cure” the problem with the contract within 45 days, he has a right to cancel the contract and thereby making the contract “void.”  Certainly, Bellator is taking a different position on this.  With Bellator attorneys involved, we may see another lawsuit in MMA coming soon.

Potential issues looming in UFC lawsuit

December 22, 2014

Last week’s lawsuit filed by Nate Quarry, John Fitch and Cung Le could bring change to the UFC.  Or, it could be a legal challenge that will fall by the wayside.  Here are some potential issues to look forward to in the days and months to come.

Officially, the UFC has been quiet with respect to the lawsuit with only a short statement stating that it would “vigorously defend itself and its business practices.”  With that being said, the UFC will file an answer to the complaint.  If it is served the complaint, it must file an answer within 21 days after receiving service of the lawsuit.  Or, if it has “waived” service under Federal Rule of Civil Procedure 4(d), it would be able to file an answer within 60 days of the waiver.   The official statement provided Tuesday by the UFC indicated it had not received the lawsuit but it’s not known at this point whether official service was provided and/or the UFC agreed to waive to allow for more time to analyze the Complaint.

Paul Gift over at Bloody Elbow gave a very good two-part textbook edition of antitrust law.  If you have time and are willing, you should carve out some time to read.

Sports professor Mike McCann gave an overview of the lawsuit in an SI piece which includes potential defenses that the UFC may utilize in its legal strategy.

McCann points out a key piece that this lawsuit differs from other antitrust challenges in other sports leagues like the NFL or NBA.  The UFC is a “single-entity” and unlike other pro leagues which have teams owned by different individuals/entities, the UFC is one company.  The key aspect of this as McCann points out is that the UFC avoids any scrutiny from its employment rules with fighters since it is solely owned.  Section 1 of the Sherman Antitrust Act regulates competitors.  The lawsuit filed Tuesday is predicated on section 2 of the Sherman Antitrust Act and not section 1.

The substantive legal defenses include the practical idea that the fighters voluntarily signed contracts to fight in the UFC.  This is the likely reason why the plaintiffs’ tailored its Complaint to read that the injured class is “Elite Professional MMA Fighters.”

There is also the argument that the UFC just did better in business than everyone else in the marketplace.  Despite the tombstone picture of “dead” organizations presented by plaintiffs in its Complaint, the UFC will argue that its superior business acumen allowed it to thrive while those other companies did not.

There is also the issue of the Federal Trade Commission investigation from 2011 to 2012when the UFC purchased Strikeforce, World Fighting Alliance and other MMA organizations.  The FTC decided not to pursue the matter.  MMA Payout’s FOIA request led to nothing of substance from the investigation.  While some may carve out a distinction between the FTC’s decision not to investigate further and whether there was actual wrongdoing, the fact remains that an investigation into the company led to nothing.  However, if the UFC intends to utilize this issue in some way, I would not look to the FTC as willful helpers.

As for procedural hurdles, the plaintiffs are in need of fighters to join the class.  Tito Ortiz identified that he was contacted about the lawsuit but chose not to participate.  There are only names being floated around but no other fighters have officially stepped up.  At a certain point, the plaintiffs will need to go to the court to certify the class which the UFC lawyers will likely oppose.  If the court denies the class, the likely result would have the three named fighters bring these claims on their own.  With 5 reputable firms involved in this lawsuit on behalf of plaintiffs, one would assume they have a notion of fighters that are willing tot join the lawsuit.

The UFC has stated it would “vigorously defend” its business practices.  This will likely take the shape of a motion to dismiss the lawsuit from the outset.  Essentially, the UFC will deny the claims made in the lawsuit offering its own perspective on plaintiffs’ claims.  If nothing else, the motion to dismiss is the first strategy in avoiding any type of substantive discovery.  What the UFC does not want to happen is a discovery process (which we anticipate would be long and drawn out) which might reveal documents that could be damaging for the case and from a PR perspective.

The UFC might also seek to transfer the venue to the district court in Nevada.  While Le lives in San Jose.  Quarry and Fitch live in Oregon and Nevada respectively.  Although the UFC has held events in the San Jose area, the standard form contracts the fighters signed probably indicate that the jurisdiction for any dispute is in Nevada, where the UFC offices are located.  The UFC might argue that plaintiffs are “forum shopping,” essentially finding a location with a sympathetic jury.  California, especially Northern California, is more open to plaintiffs’ cases.  Although I do not know the landscape of Nevada juries, it’s likely they are more conservative.  With one of the plaintiffs a Nevada resident, the UFC might argue that the venue of the case be transferred to Nevada.

Payout Perspective:

Entering the first quarter of 2015, one might think there is looming pressure for the business to turn around.  With three big PPV shows (notice the $5 increase for UFC 182?) in the first quarter, the announcement of the Reebok deal, the CM Punk signing and now the Rampage Jackson deal one would think that the company is hoping S&P will raise its financial outlook and steady its credit rating.  It would not be out of the realm of possibility for S&P to downgrade its status if Zuffa business does not get better.

The news of the lawsuit will not help Zuffa’s financial outlook since you can expect its legal budget to increase due to this.  A potential Bellator battle could be on the horizon as well since the UFC signed Rampage Jackson despite Scott Coker’s claim he is still under contract.  With a newsworthy December, we can expect more happenings in the first part of 2015.

Citing Bellator breach, Rampage Jackson rejoins UFC

December 21, 2014

On Saturday night’s UFC Fight Night 58 broadcast, Jon Anik announced that the UFC had re-signed Quinton “Rampage” Jackson.  The news comes with controversy as Bellator President Scott Coker stated that Jackson is under exclusive contract with the Viacom-owned company.

The signing of Jackson will likely be the start of a legal battle between the UFC and Bellator.

In a Fox Sports interview, Jackson indicated that he had terminated his contract with Bellator because they did not meet their contractual commitments.

Payout Perspective:

The signing comes as a surprise considering the mutual distaste Rampage and Dana White had for each other when he last fought in the UFC in January 2013.  It’s clear that based on Coker’s tweet, Jackson’s departure was not granted by Bellator.  And, the UFC did not clear with Bellator Jackson’s representation that he terminated his contract due to Bellator’s alleged breach.  It appears that the UFC is going with the strategy of plausible deniability.  It signed Jackson based on the representation that his contract was void due to the alleged breach by Bellator.  This can only lead to a lawsuit for breach of contract (filed by Bellator against Jackson) and tortious interference with a contract (against the UFC).

Jackson was mentioned in the plaintiffs’ antitrust lawsuit against the UFC in regard to the UFC’s desire to obtain exclusive sponsorships with companies.  The lawsuit mentioned the UFC blocked Rampage’s exclusive deals with Round 5 and Reebok.  Yet, the UFC forged its own exclusive deals with each.

Ortiz declined to participate in Zuffa lawsuit

December 19, 2014

MMA Junkie reports that Tito Ortiz was asked, but declined to participate in the current UFC lawsuit filed by three fighters alleging violations of antitrust law.

Ortiz’s attorney, George Prajin, informed Junkie that the current Bellator fighter would not participate in the lawsuit which seeks class action status.  According to the Junkie article, Prajin and Ortiz met with Rob Maysey, one of the attorneys leading the charge for this lawsuit a year and a half ago.  Although intrigued by the proposed litigation at the time, Ortiz declined to be involved. Ortiz’s attorney indicated that he was contacted recently about the lawsuit but maintained to stay out.  However, Ortiz indicated that he may change his mind if the class is certified by the court.

Payout Perspective:

The Ortiz information is interesting and may be one of the hurdles the plaintiffs will have in getting fighters to join the lawsuit.  It appears that Ortiz would most likely not want to actively participate for several reasons.  He indicated in the article that he doesn’t want his name used just for publicity.  Also, there is a storied past with Ortiz and White and perhaps he is looking down the road at does not want to get caught up in messy litigation.  Regardless of being a named plaintiff, if this lawsuit enters the discovery stage we will see if one of the sides attempts to depose Ortiz about his past with Zuffa.

« Previous PageNext Page »